Zinvest, LLC v. Gunnersfield Enters., Inc.

• Decision Date: 21 November 2017
• Docket Number: DA 16-0769
• Citation: 2017 MT 284,405 P.3d 1270,389 Mont. 334
• Parties: ZINVEST, LLC, a Montana limited liability company, Plaintiff and Appellee, v. GUNNERSFIELD ENTERPRISES, INC., a California corporation, Defendant and Appellant.
• Court: Montana Supreme Court

389 Mont. 334

405 P.3d 1270

2017 MT 284

ZINVEST, LLC, a Montana limited liability company, Plaintiff and Appellee,

v.GUNNERSFIELD ENTERPRISES, INC., a California corporation, Defendant and Appellant.

DA 16-0769

Supreme Court of Montana.

Submitted on Briefs: August 23, 2017

Decided: November 21, 2017

For Appellant: Mark L. Evans, Axilon Law Group, PLLC, Bozeman, Montana Elizabeth L. Griffing, Axilon Law Group, PLLC, Helena, Montana

For Appellee: W. Scott Green, Daniel Larry Snedigar, Patten, Peterman, Bekkedahl & Green, PLLC, Billings, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶ 1 In 2008, Gunnersfield Enterprises, Inc. purchased five condominium units and an adjoining vacant lot. The deed was properly recorded and a Realty Transfer Certificate was submitted to the Department of Revenue, which did not correctly update its ownership records for the vacant lot. Gunnersfield received notice of and paid the tax assessments for the five condominium units each year, but the Gallatin County Treasurer continued to send the tax bills for the vacant lot to the previous owner. When the taxes went unpaid, the Treasurer sold the lot for delinquent taxes. Zinvest, LLC acquired the County's interest. Gunnersfield now appeals the District Court's determination to quiet title to Zinvest. We reverse and remand, concluding that the Department of Revenue's defective property tax assessment voided the tax lien sale.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 2 In June 2008, Gunnersfield purchased five commercial condominium units, known as Units 1 through 5, and an adjacent fenced lot, known as Lot 6A, from Prospero, LLC in a single transaction. A single Warranty Deed conveying all of the property to Gunnersfield was recorded that same month in the records of the Gallatin County Clerk and Recorder. The Department of Revenue (Department) received both a copy of the deed and the Realty Transfer Certificate in 2008. While the Department correctly updated its ownership records for Units 1 through 5, it did not update the ownership record for Lot 6A.

¶ 3 Gunnersfield paid all property tax notices it received from the Gallatin County Treasurer (County) for the property. The notices it received, however, were for the five condominium units only. From 2009 through 2012, the County continued to send tax bills for Lot 6A to Prospero, the former owner. Beginning in the second half of 2009 and continuing in the subsequent years, the taxes for Lot 6A went unpaid. In July 2010, the County offered a property tax lien for sale against Lot 6A for the 2009 delinquent taxes. At that time there was no purchaser and the County was listed as the purchaser of the lien.

¶ 4 In 2012, Zinvest, LLC became interested in the property and took action to acquire the tax lien from the County. Zinvest sent the statutorily required notice of pending assignment of the tax lien to Prospero, which the U.S. Postal Service returned undelivered. Zinvest did not send notice to Gunnersfield. Upon Zinvest's payment of the delinquent taxes, interest, and fees, the County assigned its tax lien interest in the property to Zinvest on October 9, 2012.

¶ 5 Zinvest then began the process to acquire a tax deed on the property. During this process, Zinvest obtained a Litigation Guarantee from Stewart Title, which revealed that the title to Lot 6A had vested in Gunnersfield in 2008. Zinvest sent a notice that a tax deed may issue to Prospero, to Gunnersfield, and to the County. Gunnersfield admits that it received this notice. In an affidavit from Jon Chaney, the President and majority shareholder of Gunnersfield, Gunnersfield attested that it inquired with the County about what property was at issue in the notice. The County office staff informed Gunnersfield that the notice pertained to the property located at 153 Shepherd Trail, the street address for the condominium building. Lot 6A has no street address. Gunnersfield maintains that it assumed the notice must relate to condominium Units 6 and 7, which it believed Prospero still owned, because Gunnersfield had never been notified, and was unaware, of any delinquent taxes on its own properties. In September 2013, when the period for redemption expired, the County issued a tax deed to Zinvest.

¶ 6 Zinvest filed a quiet title action for the property in the District Court in October 2013. During this litigation, Zinvest's attorney sent a letter to Gunnersfield requesting that it sign a Disclaimer of Interest. Gunnersfield signed and returned the Disclaimer of Interest, again believing that the proceedings related to Units 6 and 7, and not to Lot 6A. The District Court granted final judgment and quieted title to Zinvest in May 2014.

¶ 7 Realizing its error in February 2015, Gunnersfield filed a motion for relief from judgment with the District Court. The court granted the motion and struck Gunnersfield's prior Disclaimer of Interest from the record, reasoning that it was "not unreasonable" for Gunnersfield to assume that the proceedings did not pertain to its property and that "negligence in this instance [was] excusable." Following additional briefing and argument, the District Court denied Gunnersfield's motions for summary judgment and granted Zinvest's motion. It issued a final judgment on December 2, 2016, quieting title to Zinvest.

STANDARDS OF REVIEW

¶ 8 This Court reviews a district court's grant or denial of summary judgment de novo. RN & DB, LLC v. Stewart, 2015 MT 327, ¶ 13, 381 Mont. 429, 362 P.3d 61. Like the district court, we apply the criteria of M. R. Civ. P. 56(c)(3) to determine whether there is a "genuine issue as to any material fact" and whether "the movant is entitled to judgment as a matter of law." M. R. Civ. P. 56(c)(3) ; see also RN & DB, LLC, ¶ 13. If there is no genuine issue of material fact, we review for correctness the district court's conclusion that the moving party is entitled to judgment as a matter of law. RN & DB, LLC, ¶ 13.

¶ 9 We review de novo a district court's interpretation and application of a statute. Dick Irvin Inc. v. State, 2013 MT 272, ¶ 18, 372 Mont. 58, 310 P.3d 524.

DISCUSSION

¶ 10 Whether the defective property tax assessment voided the tax lien sale.

¶ 11 It is undisputed that Gunnersfield properly recorded its deed to Lot 6A and that the Department received the Realty Transfer Certificate, which showed correctly the conveyance of Lot 6A from Prospero to Gunnersfield. It is also undisputed that the Department continued to assess Lot 6A to Prospero, rather than to Gunnersfield; that Gunnersfield did not receive any notices of taxes due on Lot 6A; and that Gunnersfield paid all taxes due on the notices it did receive for Units 1 through 5. Gunnersfield argues that, under these facts, the Department's tax assessments on Lot 6A were invalid.

¶ 12 Among its arguments before the District Court, Gunnersfield contended that errors in the tax assessment of the property invalidated the assessment and therefore rendered void the tax deed to Zinvest. The District Court disagreed and held that, even though the wrong party was assessed, the tax assessment was valid under § 15-8-201(4), MCA. The District Court reasoned further that the language in the misnomer statute protecting tax lien sales, § 15-17-325, MCA, supported this understanding. It quoted two cases from this Court in support— Cobban v. Hinds, 23 Mont. 338, 349, 59 P. 1, 2 (1899), and Meyer v. Chessman, 132 Mont. 187, 192, 315 P.2d 512, 514 (1957).

¶ 13 On appeal, Zinvest argues that the District Court decided the case correctly and that the tax assessments were procedurally proper. In support, it argues that the language of §§ 15-8-201(4) and 15-17-325, MCA, as well as some of our prior case law, indicates that taxation is an in rem proceeding, not an in personam proceeding. Zinvest thus contends that a valid assessment does not require that the actual owner of the property be assessed, as long as some individual person or entity is assessed for the parcel of property at issue. Finally, Zinvest argues that it is the responsibility of taxpayers to exercise diligence and ensure their property taxes are paid.

¶ 14 Title 15 of the Montana Code Annotated encompasses the statutes governing taxation in the state of Montana. It prescribes a detailed process both for the assessment and taxation of property and for the sale of property for unpaid taxes. The process involves multiple steps and multiple levels of government. The Department of Revenue is tasked with valuing all of the taxable property in the state and with maintaining the database of ownership and property value information. See §§ 15-7-101, -304, 15-8-101, - 201, MCA. Based on information from the Department, each taxing jurisdiction calculates its own mill levy and submits it to the Department. See §§ 15-10-201, -202, MCA. The Department computes the taxes, fees, and assessments to be levied and provides this information to each county's clerk and recorder and treasurer. Section 15-10-305, MCA. The county treasurer in turn produces and mails the property tax bills, collects the property taxes, and distributes the monies to the taxing jurisdictions. Sections 15-16-101, -104, MCA. Failure to pay taxes can result in the county treasurer taking actions under Title 15, chapter 17, MCA, to sell a tax lien on the delinquent property, and, if the taxes remain unpaid, to issue a tax deed under Title 15, chapter 18, MCA, which creates a new title extinguishing the interests of the original owner. Collier v. Kincheloe, 2008 MT 100, ¶ 15, 342 Mont. 314, 180 P.3d 1157.

¶ 15 Property taxes are one of the primary and most stable means available to support local government budgets. 5-39 Richard R. Powell, Powell on Real Property, § 39.02[1], 39-7 (Michael Allan Wolf ed., 2017). Failure to pay taxes is a serious breach of an individual's social obligations, and tax liens are a powerful tool to ensure payment. Powell, supra, § 39.04, 39-37. But the tax lien statutes mandate many procedures that...